2 years ago
125 FinanceFeeds -
The Securities and Exchange Commission has pressed charges against Sergei Polevikov for a years-long front-running scheme worth at least $8.5 million in illicit profits.
Sergei Polevikov worked as a quantitative analyst at two prominent asset management firms, including OppenheimerFunds, having access to real-time, non-public information about the size and timing of his employers’ securities orders and trades.
He used that information to secretly trade on, and ahead of, his employers’ trades from at least January 2014 through October 2019, according to the SEC’s complaint.
His lawyer, Brooke Cucinella, said her client was “surprised by the charges, and intends to defend against them vigorously […] The government has it wrong.”
At an initial appearance in Manhattan federal court, Polevikov learned that his bail requires him to post $1.5 million in cash or property, though he was freed immediately. His spending will be limited to $10,000 monthly and $500,000 was allowed for legal fees, according to the Associated Press.
On nearly 3,000 occasions, Polevikov allegedly bought or sold a stock on the same side of the market as his employers before his employers executed trades in the same stock for their fund clients and would close his positions the same day as he opened them, capitalizing on the price movement caused by his employers’ large trades.
The front-running scheme was concealed by executing the trades in the account of his wife, Maryna Arystava, who uses a different last name. This potentially allowed the fraud to last longer.
Polevikov is charged with violating the antifraud and reporting provisions of the federal securities laws. The SEC seeks disgorgement of ill-gotten gains plus interest, penalties, and injunctive relief. The complaint also names Arystava as a relief defendant.
The SEC’s Market Abuse Unit’s Analysis and Detection Center, which uses data analysis tools to detect suspicious patterns, such as improbably successful trading across different securities over time, spotted Polevikov’s trading activities which consistently generated small profits that added up to a total of at least $8.5 million over the course of the scheme.
Joseph G. Sansone, Chief of the SEC’s Market Abuse Unit, said: “As alleged in our complaint, Polevikov abused his position as a quantitative analyst and his employers’ trust by repeatedly trading ahead of large trades that the firms placed for advisory clients. Although Polevikov allegedly tried to hide his misconduct by using his wife’s account, SEC analysts were able to uncover this deceptive scheme by identifying a consistent pattern of profitable trading in coordination with the employers’ trades.”
The U.S. Attorney’s Office for the Southern District of New York also announced related criminal charges against Polevikov.
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